Over the past several years, no type of stock has been more popular than the dividend-paying variety. Investors have long been wooed by the guarantee of payouts to help secure their investments.
However, shareholders are sometimes scared away from the best dividend stocks because of price appreciation. By anchoring to a previous price for a stock, investors are unwilling to pay up for quality. That can be dangerous to any investor's portfolio. Remember, the market looks forward, not backward.
Below I will highlight three popular dividend stocks that have taken steep climbs lately and tell you why I still think they're buys at today's prices. I'll back up all three picks by making bullish CAPScalls in my All-Star portfolio. At the end I'll offer you access to nine company tickers we believe represent excellent dividend opportunities.
Cheniere Energy Partners
This company's stock is up 46% so far this year, and it offers a hefty 6.3% dividend yield.
Cheniere Energy Partners is a subsidiary of Cheniere Energy
The Sabine Pass, located on the shores of the Gulf of Mexico where Louisiana borders Texas, is important strategically. Just last month, the Federal Energy Regulatory Commission gave the go-ahead for the export of natural gas to other countries.
With a natural-gas supply glut in the U.S., prices have dropped to record lows. But the same isn't true abroad. What costs only $2 in the U.S. goes for $16 in Asia. That's a strong incentive for companies to start exporting their natural gas. As the first mover, Cheniere Energy Partners will be the tollbooth operator collecting tolls on all the natural gas flowing out of the country, and I think that's a recipe for future success.
PriceSmart's shares are up an impressive 40% since mid-January, and it offers a smallish 0.7% dividend. But don't let that scare you away: The company only uses 28% of its earnings on dividends. That means that when the time is right, the company will be able to boost its yield to much higher levels.
To get a bead on the company, just think of it as the Costco of Central America. Just like its counterpart to the north, PriceSmart has a membership-based model that offers customers goods that are both low-priced and tough to find. PriceSmart, in fact, is a go-to location for obtaining goods that are normally only available in North America.
PriceSmart currently has fewer than 30 stores worldwide, with most located in the Caribbean and Central America. I believe there are three major forces that will push the company's earnings higher in coming years: relatively strong economies where the company operates, an influx of baby-boomers retiring to cheaper and more comfortable locations, and the company's burgeoning move into South America.
Be forewarned, though: This company is currently trading at pretty high multiples, and it may be years before it's done expanding and can use its cash on hand to boost its dividend.
Finally, we have Telekom Indonesia, a company whose stock is up 23% since mid-March. Though the company has yet to announce its precise dividend for 2012, last year's would have amounted to 4.1%.
The company wowed analysts with its most recent earnings call, and it now sits at the intersection of two favorable trends. First, Indonesia has the fourth-largest population in the world. Second, that population will increasingly adopt mobile as the primary means of communication.
That means the company will likely have to commit serious cash to capital expenditures. It will also have to defend its turf against its biggest competitor, Indosat.
But as fellow Fool Dan Newman points out, the bigger picture is still pretty rosy:
Indonesians have skipped straight to cell phones. Mobile phone ownership was at 20% in 2005, and in 2011 it skyrocketed to 54%. Along with that, Indonesian users are the second-largest market on Facebook and third-largest on Twitter.
More dividend ideas
To be honest, there's no such thing as the "perfect" dividend stock. No one can predict the future, and that's why you should investigate as many promising dividend stocks as you can find. That's why I'm offering you free access to our special report: "Secure Your Future with 9 Rock-Solid Dividend Stocks." Inside you'll get the names, ticker symbols, and stories behind these nine companies. Get your copy of the report today, absolutely free!
The Motley Fool owns shares of Telekom Indonesia and Costco. Motley Fool newsletter services have recommended buying shares of Costco, Telekom Indonesia, and PriceSmart. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.